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Neste Oil, the Finnish oil refiner, has plans to become the world's largest biodiesel producer, and intends to spend billions of euros over the next 10 years building new plants to produce the alternative fuel.
Neste's primary focus is in Europe where it plans to open a 10,000-barrels-per-day biodiesel plant in Finland next year, which will be the first of what the company hopes to be many plants around the world producing fuel from renewable sources.
Kimmo Rahkamo, executive vice-president, said the company had joint ventures to build similarly sized plants in Vienna, at the Schwechat refinery operated by OMV, the Austrian energy producer; and in Dunkirk in France with Total, the French oil and gas group. Rahkamo said biodiesel was a natural market for the company to move into, given the emphasis on producing cleaner fuels.
The European Union has set a target of 5.75 per cent of transportation fuels coming from alternative fuels by 2010, and 20 per cent by 2020.
Rahkamo said that to reach the 5.75 per cent target, a fourfold increase in European biodiesel production from the 3.2 million tonnes produced last year would be required.
However, in order to meet the expected future increase in output, Rahkamo said Europe will have to look to importing feedstock from outside the region.
Palm oil
Currently, about 80 per cent of EU biodiesel is processed from rapeseed, and biodiesel consumes about half of the EU's rapeseed production of about 15 million tons, according to the US Department of Agriculture.
"I agree with these figures. Europe cannot support a large increase in biodiesel production without importing palm oil from Asia or soy oil from South America and animal fats from around the world, because we simply do not have enough land," Rahkamo told the Financial Times.
He said Neste would look to long-term supply arrangements with feedstock suppliers, and that any feedstock the company bought would be from sustainable sources.
Neste became the first oil company to join the Roundtable on Sustainable Palm Oil, a body set up to ensure that palm oil is produced from plantations that were not formerly virgin rain-forests.
"We do not want to be responsible for chopping down rainforests in Malaysia or Indonesia, so that we can make biodiesel from palm oil, because it would not be an environmentally friendly fuel," Rahkamo said.
He said that Risto Rinne, the company's chief executive, had mentioned a few times that Neste may need to invest in the upstream part of the biofuels business by buying a palm oil plantation.
"We see the move to biodiesel has another revolutionary trend in the refining industry," Rahkamo said.
However, even if all of Neste's biodiesel ambitions are turned into reality, the business will still be small in comparison with the scale of its petroleum refining business, which produces about 250,000 barrels a day of conventional petrol and diesel.
Neste is also spending 700 million euros ($894 million) on a hydro-cracker to turn fuel oil, which has the highest content of sulphur in a barrel of oil and sells for the lowest value, into non-sulphur diesel, which has the potential of adding significant value.
"If refining margins hold, we could add another 30 to 40 euros to refining a barrel of oil, but this investment works on an increased return of 15 euros to 20 euros a barrel," he said.
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